Securities litigations are frequently filed as class action lawsuits, a type of lawsuit where one person files a claim or claims in court on behalf of a large group of similarly situated people and entities (the “class”). The proposed class must consist of a group of individuals or entities that have suffered a common injury or injuries. Typically these cases result from an action, generally a disclosure, by a business or a particular product defect or policy that was publicly disclosed and available to the investing public. Securities fraud or other class action lawsuits can also result from a company failing to disclose detrimental information, that resulted in a change in the price of the company's stock to the detriment of a class of shareholders.
The identity of all of the members of the class of plaintiffs is usually unknown at the beginning of a securities lawsuit. Generally, a complaint is filed by one or more plaintiffs on behalf of the class. In order to indicate that class action status is sought, the phrase “and others similarly situated” can be incorporated into court documents. The number of class members may increase (or decrease) over time as additional plaintiffs are identified or the class definition changes. The class members can be identified during discovery proceedings, or after notices are distributed and responded to. The class definition also may be revised by the court, which might alter the size of the class by excluding or including potential class members.
Upon application by the plaintiffs or the parties collectively, the court will certify a class. Thereafter, the defendant(s) may generate a list of potential claimants. This list can be used to contact the potential class members to provide “notice,” i.e., advise them of the pendency or settlement of the action. Notice is then provided to the class by mailing class notices and/or running advertisements in newspapers, via the Internet, on radio or television, or through similar communications outlets.
When a class action lawsuit is decided in court or is settled out of court, each eligible claimant will receive relief according to the judgment or settlement through an administration process. In the past, administration of a securities class action lawsuit has been a cumbersome process, in part because classes are usually very large. These administrations often require claimants to submit through the mail large volumes of forms and documents to submit and support their claims. These submissions may be made via e-mail or regular mail, but in either case, documents and information would need to be scanned and/or inputted into a database system by hand.
The transaction costs associated with processing the tens of thousands of claims, or more, that are received by mail can be significant. Although e-mails are less cumbersome than regular mail and are used in ever growing numbers, receipt of the information through e-mail has presented the same difficulties as receipt through the mail—there has been no uniformity, no way of tracking and no specific method of organization of e-mails or any attachments without significantly increasing transaction costs. With both e-mails and paper files, there has been difficulty in maintaining proper organization of files without the potential of losing or misplacing information relating to claims. Of course, where regular mail is used this cost is further increased. Where e-mails are used, there is the added possibility that malicious code can be imported into a database inadvertently. Even though these e-mails pass through a perimeter firewall and virus protection is used, a significant risk of infection still exists.
The transaction costs arising from the administration frequently are paid from the settlement fund. Therefore, the total distribution in the class action lawsuit, and the amount that each eligible claimant may recover can be significantly diminished by the administration costs associated with this mailing procedure, the costs of other attempts of notifying the class members, and the costs of the claims processing.
Accordingly, there is a need for a simple, easy to use system and method for filing claims relating to a class action lawsuit, validating the claims, tracking the administrative process and communicating the status of the claims processing to claimants, and overseeing disbursement of relief.